Should you invest in Reliance Capital?

Reliance Capital; part of ADAG Group, has diverse interests in the insurance business, commercial finance, housing finance, asset management, Wealth management, asset reconstruction  and other activities in financial services.

RCFL is a non-banking finance space lender with a focus on asset backed lending. The commercial finance business has an aggregate asset under management including securitized portfolio of Rs.16,191 core.

Important Investment Triggers

  1. Life Insurance business- On October 2015 Nippon Life Insurance increased their holding from 35% to 49%. Effectively valuing the insurance business at Rs.10000 crores.

 

  1. Demerge of its commercial finance division – Spinning Reliance Commercial Finance Limited off into a separate wholly-owned subsidiary.

  1. Housing finance- The housing finance business is considered to be spun off from reliance capital and be separately listed which can bring valuation multiples as high as other housing financing companies like DHFL, GIC etc for Reliance Capital. The expected book value of housing finance business is 1539 crores.

 

  1. Reducing debt by selling noncore assets – In November 2016 Reliance broadcast network; the largest operator of FM channels in India, has decided to sell 49% stake in radio broadcast business. This entire stake sale will help reduce debt by approx Rs.1900 crore.

Technical Aspects

Weekly chart attached here shows that price has been in long sideways range from past more than 5 years. Weekly chart shows that stock has key resistance near 635-610 zone.

In 2011 stock has witnessed drastic fall from the price mentioned. In year 2014 price made an attempt to breach the resistance twice but failed to attract the upside momentum and witness decline towards the lower end of the range near 285-310 levels.

Around 285-310 zone stock has taken support multiple times and has witness strong upside momentum. In Feb 2016, Stock seen moving higher from the support zone and from there stock has been making higher highs and higher lows formation which is bullish sign for the stock.

Stock may continue to enjoy uptrend until price continues to hold this bullish formation. Upside move from the support stock has approached to the key resistance zone mentioned above. From last couple of week stock has been struggling to breach the resistance.

Thus this stock should be kept in radar for buying opportunity post stock gives breakout and manages to sustain above long congestion range. Breakout from the range will lead the change in trend from sideways to up and price will enter in new trading range.

 

Author’s Bio:

Raja C V

Raja administers every aspect of Chartadvise.com, which provides Share Trading Courses in Mumbai. He takes care of a variety of technological, financial and administrative function to keep Chartadvise.com humming at peak efficiency all the time!

Having a market experience of more than 8 years in advising on Equity, Derivative and Commodity he is able to handle client’s requests with ease. Possessing a very cool head, he is the best person to have on your side when the market gets into one of its usual erratic self.